What is forced liquidation
The margin rate is an indicator to measure the risk of a position's collateral assets. When the margin rate is close to the minimum maintenance margin rate, your position will be forcibly taken over by the system. We use the mark price for margin rate calculations to avoid liquidation due to illiquidity or market manipulation.
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In order to prevent the impact on market liquidity when large positions are liquidated, resulting in large losses from over-positioning, we adopt a step-by-step mechanism to reduce positions. Each step corresponds to a different maintenance margin rate. When the system determines that the margin is not enough for the maintenance margin of the current position, it will reduce the position and reduce the number of positions to the position corresponding to the next position.
After the position reaches the liquidation condition, the system automatically executes the following measures to release the available margin to prevent the position from being liquidated: 1. The system will cancel all current orders for this type of contract; 2. Self-trade long and short positions of contracts of the same variety; If the margin rate of the user's position is still lower than the current tiered maintenance margin rate after performing the above steps, the forced position reduction operation will be performed. 3. If the margin rate is still < current, the system will reduce the position to the upper limit of the net position of the next gear for the purpose of lowering the position, so that the margin rate is greater than 0%; 4. If the system calculates the forced liquidation until the adjustment coefficient is in the 1st gear, and the margin ratio is still not greater than 0%, then all positions will be liquidated.
When the stronghold is triggered, users cannot perform operations related to the contract of this product.
Taking BTC as an example, when the user's position is large and is at level 3 and above (that is, the number of positions is >=12001, for example: 15000), the liquidation engine detects that the user's current margin rate is less than or equal to the required maintenance When the margin rate + the liquidation fee rate, all the user's positions will not be directly liquidated. Instead, the forced partial reduction is performed, and the number of reductions required to reduce the current position by 2 gears is calculated first = the current number of sheets - the maximum number of sheets in gear 1 = 15000-2000 = 13000 sheets.
If the user is in the isolated position mode, the system will force the order price that is slightly higher than the latest transaction price to place a mandatory partial reduction order for the number of positions the user needs to reduce. During the forced partial reduction, the user's position in this direction of the contract will be frozen, and all contract-related operations cannot be performed.
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Articles in this section
- Margin and profit/loss calculations
- Ladder Maintenance Margin Rate
- Leverage and position limit
- Margin and profit and loss calculation
- Ladder Maintenance Margin Rate
- Leverage and Position Limits
- Elements of contract varieties
- Insurance Funds and Apportionments
- Ladder Liquidation Mechanism
- Index price
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